The changing face of Employment Tribunal litigation

Statistics published by the Ministry of Justice show that the Employment Tribunals received 79% (or 9,801) fewer claims in the period October to December 2013 than in the corresponding period in 2012. It is safe to assume that the main reasons for this dramatic drop can be found in the equally dramatic changes that have been, and are being, made in relation to the Tribunal process.

These changes are creating a more employer-friendly business environment, introducing greater obstacles for employees to bring unmeritorious or vexatious claims and reducing the risk to employers when dealing with problematic or underperforming employees. Those employees who may previously have lodged claims merely to inconvenience an employer or force a favourable settlement are now less likely to use the Tribunal system for tactical leverage.

This publication is prepared for the general information of our clients and other interested persons. It is not,
and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be
regarded as legal advice.
Insight:
May 2014
Employment & Benefits
The changing face of
Employment Tribunal litigation
Statistics published by the Ministry of Justice show that the
Employment Tribunals received 79% (or 9,801) fewer claims in the
period October to December 2013 than in the corresponding
period in 2012. It is safe to assume that the main reasons for this
dramatic drop can be found in the equally dramatic changes that
have been, and are being, made in relation to the Tribunal process.
These changes are creating a more employer-friendly business environment, introducing
greater obstacles for employees to bring unmeritorious or vexatious claims and reducing
the risk to employers when dealing with problematic or underperforming employees.
Those employees who may previously have lodged claims merely to inconvenience an
employer or force a favourable settlement are now less likely to use the Tribunal system for
tactical leverage.
Qualifying periods and pre-litigation steps
The increase in the unfair dismissal qualifying period from one year to two years, means
that employees must be employed for a longer period of time before becoming eligible for
unfair dismissal protection. This makes it easier for employers to assess and dismiss poor
performers. Previously, if employees were given the benefit of the doubt for more than a
year, any subsequent dismissal could lead to unfair dismissal complaints. In cases where
no qualifying period is required, in particular those of discrimination, the pre-litigation steps
that employees had previously relied upon have also been narrowed by the abolition of
discrimination questionnaires.
Limit to compensation
The cap on unfair dismissal compensation has also changed so that it is now the lower
of one year’s salary or the prescribed maximum (currently £76,574). For lower-earners,
there may be less appetite for incurring the time and costs of bringing a claim where their
maximum compensation will be capped at their annual salary.
Pre-termination negotiations and ACAS
In an attempt to discourage parties from Tribunal litigation, changes have been introduced
to encourage early resolution of disputes. Any pre-termination negotiations between an
employer and an employee (meaning any offer of or discussions about settlement terms)
are inadmissible in unfair dismissal proceedings, unless there is improper behaviour. This
gives employers more comfort in making settlement offers where there is no “existing
dispute” to trigger without prejudice privilege. In practice, this will assist in performance
Stephen Ravenscroft
Partner
+ 44 20 7532 2118
sravenscroft@whitecase.com
Oliver Brettle
Partner
+ 44 20 7532 2103
obrettle@whitecase.com
Helen Joseph
Associate
+ 44 20 7532 2751
hjoseph@whitecase.com
White & Case LLP
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London EC2N 1DW
Tel: + 44 20 7532 1000
Fax: + 44 20 7532 1001
related dismissals which are often difficult
to justify as “fair” as they may not fall
squarely within the meaning of “conduct”
or “capability”.
Additionally, a new system of pre-claim
conciliation becomes mandatory from
6 May 2014. Before lodging a claim, a
prospective claimant will need to notify
ACAS, the Government’s industrial
relations service, which will seek to initiate
conciliation. If the parties do not wish to
participate in conciliation or a settlement
cannot be reached, ACAS will issue a
certificate to this effect. A Tribunal claim
cannot be lodged until the claimant has
this certificate. Such changes are likely to
encourage parties to consider pre-litigation
settlement more carefully.
Employment Tribunal process
New Tribunal rules of procedure and fees
came into force on 29 July 2013. Claimants
pay an issue fee of £160 or £250 when
lodging a claim, and a hearing fee of £230 or
£950. Previously the Tribunal process could
fairly be termed “free” for employees. The
trade union, Unison, has challenged the
introduction of such fees on the ground
that it makes it “virtually impossible” for
individuals to exercise rights conferred by
EU law. While the High Court dismissed
this challenge as having been made
prematurely, the door has been left open
for future challenge.
Once the issue fee is paid,
Tribunals have the power to reject a
claimant’s ET1 if it is in a form which
“cannot sensibly be responded to”.
Quite what this means is unclear but,
on a common-sense reading, this will
undoubtedly have the greatest impact
on unrepresented claimants who may
have poor literacy skills and be unable
to articulate the legal basis for their
claim. Completing and submitting claim
forms properly increases the likelihood
of prospective claimants incurring legal
costs upfront. This may appear unfair for
those who have genuine claims but do not
have the financial resources to fund these
costs. On the other hand, many employers
feel relief that individuals are required to
properly set out their claim as this reduces
the risk of them abusing the purpose of the
Tribunal regime.
If an ET1 is accepted, it will then be subject
to a new sift stage, which gives a Tribunal
the power to strike out a claim in full or in
part where the judge considers the claim
has no reasonable prospects of success or
the Tribunal lacks jurisdiction. The facts and
merits of a case will therefore be assessed
at a much earlier stage than previously,
with the objective being to strike out
unmeritorious claims and deter employees
from bringing disingenuous claims solely for
tactical reasons. It remains to be seen how
robust Tribunals will be in exercising these
powers, particularly in cases of complex
claims involving allegations of discrimination
or whistleblowing, where the hearing of
evidence will be crucial to determining
prospects of success.
While these changes make it harder for
employees to bring claims, employers are
not entirely positively impacted. Employers
who lose at Tribunal may now be subject to
financial penalties of up to £5,000 where
there are aggravating factors. Although
not substantial sums, the prospect of
such fines, and potentially being required
to pay the claimant’s Tribunal fees, may
be enough to deter smaller employers
from vigorously defending claims all
the way to hearing solely to pressurise
employees into withdrawing or accepting a
lower settlement.
Comment
Employees must wait longer to qualify
for unfair dismissal protection and are
more likely to need legal representation
at an early stage to reduce the risk of
their ET1 being rejected or their claim
being struck out at the sift stage. This will
inevitably result in employees incurring
greater costs upfront and so employees
will weigh this against the award they could
receive if successful. This may lead to an
increase in data subject access requests
in place of discrimination questionnaires,
and potentially, discrimination and
whistleblowing claims, for which no
qualifying period of service is required and
for which compensation is uncapped.
In practice, it will be easier for employers
to deal with difficult or underperforming
employees as the risk of potential liability
has been mitigated by the changes.
The increased qualifying period gives
employers more time to assess an
employee’s performance and suitability for
a role. The introduction of pre-termination
negotiations and mandatory conciliation
enables employers to have open and
frank discussions about performance and
retirement plans, and negotiate the early
exit of employees who may not be meeting
the standards expected. This will be
especially relevant when dealing with the
removal of senior executives or managers
for business related reasons. The change to
the cap on unfair dismissal compensation
also means that, when dealing with lower
earners, employers will not be faced with
the prospect of paying compensation above
an employee’s annual salary.
That is not to say that employers should
not still strive for a fair dismissal. Where an
employer has genuine concerns about an
employee’s conduct or performance, these
changes should not be used as a substitute
for conducting a formal process.
In this publication, White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership,
White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.
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